MAKING CENTS: Estate planning for non-traditional relationships

By John NapolitanoFor The Patriot Ledger

Saturday

Nov 22, 2014 at 5:00 AM

Today’s families are a lot different than Ward and June Cleaver. There are more families today with non-traditional situations than ever before. It is very common in my profession to have clients with same sex marriages, second marriages with assets and children from a prior marriage, as well as families that may look traditional, yet marriage was never on the agenda.

Financial and estate planning for everyone is important, but if the situation has any of the variables referenced above, planning is a must.

The first issue to consider is asset ownership. You can own assets in your individual name, in joint name or in an entity such as an LLC or trust. How you own your assets will determine many issues ranging from taxation to disposition through an estate or disability. Not all couples combine their financial assets where everything is owned jointly as we would have expected Ward and June to do.

Besides retirement accounts which cannot be held jointly, many families choose to maintain separate asset ownership structures with dispositive plans due to death or disability that may direct assets to other than the surviving spouse.

For married couples with assets owned individually, your assets will be distributed according to the terms of your will. This entails some time and administrative expense and the admission of the estate to your state’s probate process. If your intention is that the assets go to your survivor anyway, joint ownership may be more efficient. If you’ve got concerns in this situation, a trust may actually work better.

For those on their second or more marriages, you must be clear about who gets what after the first spouse passes. It is not good enough to have a verbal agreement with your spouse, where they can use the assets after you pass as long as the survivor makes sure that any leftover money goes to the first-to-die’s children. This situation is best satisfied through the use of a trust.

For families that look traditional except for that piece of paper called a marriage certificate, don’t assume anything. At least married couples have some state protection from disinheriting a spouse, but that is not true in all 50 states. For estate tax purposes, unmarried couples have no unlimited deduction for leaving assets to a spouse, because the mother of your child technically isn’t your spouse. Furthermore, without a good will or trust, it is possible that your spouse will only inherit a portion of the assets, with the remainder going to parents or siblings of the deceased.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree and 2013 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthmanagement.com or on Linked In. READ MORE of his columns. Leave a comment at the end of the column or CLICK to write a letter to the editor.

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